davidzet's blog

Politicians don't know what we want.

Wed, 18 Jun 2008 05:28:01 -0700

The dems are famously noted for advocating big government, but republicans have overtaken them in paternalistic overreach. Anyone interested in government should read Hayek, and this is what I put into my blog today [Please comment there]:

Let me elaborate on Hayek, who is famous for knowledge problem and spontaneous order.

My idea of the knowledge problem (I am no Hayek scholar) is: I know what I know but not what you (or many others) know. For me to organize society (i.e., as a government) to some "optimal" level, I need to know what you know, but that information is hard for you to convey to me credibly ("yes, I need money for my babies") and hard for me to assemble/reconcile ("baby subsidy here versus there"). Hayek said that planned economies would collapse under the weight of the knowledge problem, and he expressed his ideas in one of the most important papers ever published in economics (many economists would agree), The Use of Knowledge in Society.

After expressing the knowledge problem, Hayek gave a solution: Prices act as a means of coordinating behavior such that no central authority need know or direct action. Thus, a market system will deliver a "spontaneous order" wherein the bread is in the shop when you want it and your salary will reflect the value of your skills and knowledge to everyone around you. (Adam Smith pointed out this result in the 18th century.) Contrast this order with "government order" that people often find frustrating.

Hayek gave us an excellent description of how the world works and how to improve it through more decentralization, markets, price signals, etc. That's why I recommend markets (under private or public management) to "solve" many water problems.

Bottom Line: Hayek tells us to be humble about what we know, to trust in the decisions of others, and facilitate the negotiation and cooperation of many through voluntary mechanisms. What's not to like?

Howdy!

Sun, 08 Jun 2008 16:40:42 -0700

Adam asked me to join y'all with some thoughts and opinions.

I blog on water and related topics at aguanomics so most of my stuff here will be copied from there. (It's a lot of work keeping a blog going!)

I am basically a free-market libertarian, but I am no fan of "unbridled" capitalism. (I've been to China). I think that the State does have a role to play wrt public goods -- either in their provision (laws, standards) or their financing (education, health care). I think that government charity can crowd out private charity, the 10th amendment has been abused too much, the drug war (and illegal prostitution) is a destructive waste of time, money and people, and that taxes should be reformed to reduce distortions (i.e., higher property taxes; zero taxes on corportations). OTOH, I think that corporations deserve no special treatment, and I would like all laws (including free trade agreements) to be one page long.

My number one goal for political reform is neutral redistricting (no gerrymandering). On top of that, I am in favor of gender quotas in the legislature, i.e., merge pairs of districts, then have women compete for the woman seat and men for the men seat.

The State should guarantee basic rights and security for people and then get out of the way. Often people claim that the State is "helping" but the State is really being manipulated by the powerful. See Baptists and Bootleggers

All of this kinda sounds mish-mashy, but life is complicated and simple labels (e.g., democrat, libertarian, white, american, male, etc.) do not capture anyone accurately.

Immoral Economists

Sat, 07 Jun 2008 09:46:27 -0700

[reposted from aguanomics]

In this post yesterday, I said that the price of water should rise.

In response, aqua-girl said...

How can you say that! I think it is morally reprehensible to charge money for water. Water resources belong to everybody and consuming water is a basic human right.

I think economists are immoral!

Let's respond to aqua-girl's comments:

Economists are often amoral -- they are interested in efficiency (maximizing surplus, wealth), not equity (the distribution of that wealth).
Water is certainly something that everyone needs to live and charging a price for something someone needs to live (and for which no substitutes exist) is immoral.
But, free things must have an unlimited supply. If not, demand exceeds supply, and shortages result.
Shortages result in rationing that favors the politically powerful and/or resource-rich. Shortages hurt the poor -- see examples such as this.
Also note that something owned by everyone is not protected from depredation and the tragedy of the commons often results.
Hence aqua-girl's idea will end up hurting the poor she is trying to help -- either because it will divert the resource to the powerful or destroy it.

Although I disagree with aqua-girl's idea (all free all the time), I am not the heartless, immoral economist (redundant?) she imagines. As I have said many many times on this blog (and in Chapter 7 of my dissertation), I recommend that everyone receive some water for free. After they receive this amount, they must pay for additional water. Put differently, water is free to misers, but wasters pay heavily.

The free/pay price schedule (a form of increasing-block pricing) is not my original idea. I heard about its use in South Africa, where a judge recently ruled that people have the right to 50 liters/capita/day (LCD).

People in Southern California use about 800LCD. I've recommended a basic right of 400LCD (just over 100 gallons), with extra available to those who want to buy it. People in Beverly Hills use over 1,200LCD.

Bottom Line: It's immoral to deny water to people, so everyone should get some water for free (equity). There will not be enough water if it's free, so everyone should pay if they want more than their free allocation (efficiency).

PLEASE COMMENT ON THE ORIGINAL POST, HERE